Counting on creativity

If there’s a business that’s no stranger to ups and downs, it’s the Swiss watch industry. Once nearly wiped out by the introduction of quartz movements, it’s rebounded with a vengeance, fuelled recently by spectacular demand in China. Recent figures suggest that such growth – up to 40 per cent since the GFC – can’t be taken for granted. Swiss exports to China fell for the first time in three years in September (by 27.5 per cent compared with September 2011, mirroring falls of 19.9 and 21.3 per cent in neighbouring horological strongholds Hong Kong and Singapore). By October, things had rebounded somewhat, the year-on-year figures suggesting worldwide growth of 13.2 per cent, and only slight dips in China (-12.3 per cent) and Singapore (-2.8 per cent), while Hong Kong was up by 2.7 per cent.

If this brought a sigh of relief it’s because the region takes about half of Switzerland’s exports. But as insiders have pointed out, the mad growth was never going to last, and this year’s once-in-a-decade change of leadership in China was always going to create uncertainty. A downward trend had been evident since the beginning of this year, says A. Lange & Söhne’s Asia Pacific managing director Franck Giacobini. He attributes it partly to China’s anti-corruption push. “As much as 60 per cent of expensive watches in China are gifted to officials, and with the political changes you don’t know who to give to," he says. “You don’t want to make a mistake and give a watch to the wrong person."

Giacobini also notes a shift in where Chinese buyers prefer to purchase: “For rich Chinese it’s prestigious to show you’ve travelled to Europe to buy – so not Hong Kong, but abroad." That includes Australia, where sales look like improving 10 per cent over last year.

Indeed, in an age when we don’t need a watch at all, there’s an awful lot being sold. Watch sales to mid-year for the Swatch Group (Omega, Breguet, Blancpain, Longines, Tissot, Rado and Swatch) grew 16.7 per cent compared with 2011, to CHF 3.4 billion ($3.5 billion.) Likewise, five-month sales for what Richemont calls its “maison brands" (IWC, Jaeger-LeCoultre, Panerai, Vacheron Constantin, Baume & Mercier, Piaget and A. Lange & Söhne) grew 16 per cent, excluding Cartier, a powerhouse in its own right. Richemont sales last year totalled more than €8.8 billion ($11 billion). And luxury watchmaking’s third power, LVMH (Bulgari, Hublot, Tag Heuer, Dior and Zenith) saw its first-half watch revenue more than double from €576 million to €1.3 billion, although this includes, for the first time, the Bulgari brand, bought last year.

In the first 10 months of 2012, the Swiss exported more than $17 billion worth of timepieces, an increase of 13.7 per cent, despite any adverse winds from Asia. So what’s maintaining demand? Easy: the product. If sales are see-sawing, the same certainly isn’t true of innovation – it’s never been stronger.